Middle class families may be £40,000 worse off due to stealth tax

Middle class families may be £40,000 worse off due to stealth tax

Middle class families will be up to £40,000 worse off over the next decade because of Chancellor’s stealth tax raid, new research shows

  • Chancellor Jeremy Hunt froze income tax thresholds in his Autumn Statement 
  • Research shows middle-class families could be £40,000 worse off over decade
  • Someone earning £33,000 will pay an extra £4,040 in income tax, study says

Middle-class families could be £40,000 worse off over the next 10 years after Jeremy Hunt hiked taxes to plug a £50billion hole in public finances, research shows.

In the autumn statement the Chancellor announced he would freeze income-tax thresholds until 2028 at the earliest.

A consequence of the decision means that thousands more families will end up paying increased amounts of tax, while earnings fail to keep pace with inflation.

The Office for Budget Responsibility previously estimated that 3.2 million people will be dragged into paying the 20 per cent basic rate of income tax due to the freezing of the personal allowance at £12,571.

An estimated 2.6 million people are predicted to be pulled into paying the 40 per cent higher rate of income tax, which has a threshold of £50,271. 

The Times reported that research from the House of Commons Library showed that a family with two earners on £60,000-a-year each will be £40,880 worse off over the next decade compared to if income-tax thresholds had risen in line with inflation.

Middle-class families could be £40,000 worse off over the next 10 years after Jeremy Hunt’s hiked taxes to plug a £50billion hole in public finances, research shows

Mr Hunt froze the income tax personal allowance, as well as the threshold for paying higher rate income tax, in an attempted to fill a huge blackhole in the nation’s finances.

However experts think it could lead Britain to a continuous cycle of higher taxes.

The Times found that a worker earning £60,000 a year will pay an estimated more than £134,000 in income tax during the next decade.

This equates to an 18 per cent higher tax bill than it would have been had the thresholds not been frozen.

The Liberal Democrat commissioned analysis  found that someone on an average salary of around £33,000 will pay an extra £4,040 in income tax – the equivalent of 42 days unpaid work.

Sir Ed Davey, the Liberal Democrat leader, said that the Government changes represented a ‘lost decade of unfair tax hikes and soaring inflation’

Sir Ed Davey, the Liberal Democrat leader, said that the Government changes represented a ‘lost decade of unfair tax hikes and soaring inflation’.

‘Families are watching aghast as their pay cheques fall while mortgage costs soar. It is deeply shameful that the Conservative government has chosen to slash taxes for the big banks while hiking them for the public,’ he said.

The head of Citizens Advice, Dame Clare Moriarty, warned that higher-income families were turning to charity for help amid the cost of living crisis, saying the organisation was seeing people ‘who thought they’d never need us’.

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